The Trans-Pacific Partnership (TPP
) will help boost Vietnam
’s trade, improve the financial sector as well as make its state-owned enterprises (SOEs) more competitive, said K.C. Fung, a professor of economics at the University of California, as the Vietnamese parliament is expected to ratify the agreement in the coming July.
Many economic studies indicate that Vietnam will likely benefit from higher exports, larger foreign direct investment inflows and a rise in economic growth.
The country’s key export markets, especially the U.S. and Japan, will reduce both import tariffs and non-tariff barriers, opening up more doors for Vietnam’s exports of textiles, garments and consumer electronics, said Fung, who was a senior economist at the White House Council of Economic Advisers during the George H.W. Bush and Bill Clinton administrations.
Vietnam will also see an improvement in its financial standing, including an increase in its foreign reserves, he added. With an increase in exports Vietnam will start to see a steadier flow of foreign reserves into its coffers, and a potentially larger current account surplus.
With an improvement in the current account, investors will gain more confidence in the currency. “One of the benefits of the TPP may be a more stable currency,” Fung said.
In addition, the TPP opens up a new and sustainable channel to generate growth for Vietnam and should reduce the need for the government to rely excessively on domestic credit and an expansionary fiscal policy.
Fung noted that the TPP would make Vietnam an even more attractive destination for FDI, which in turn will increase jobs. Foreign companies such as Intel
, Nike, Uniqlo and Samsung Electronics have created jobs in large numbers that are also of higher quality than much domestically generated employment.
The U.S.-led deal will force Vietnam’s SOEs to be more competitive in price and quality. One of the major achievements of the TPP is the introduction of competitive neutrality for SOEs.
This part of the agreement will likely have the effect of putting pressure on Vietnam’s SOEs to become more efficient and profitable. Fung said.